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WTO workload backlog shifts likely accession to 2006

Source: 16/Feb/2005 Nguoi Lao Dong

Feb 21, 2005, 09:26


Vietnam is undergoing the final phase on the path to the World Trade Organisation (WTO). Although there is a mammoth amount of work that is required for this hoped for final phase, it is far from a certainty that Vietnam will succeed in concluding negotiations with the many partner countries this year, according to trade minister Truong Dinh Tuyen.

In order to successfully set foot in the WTO this year, a great volume of work still awaits Vietnam. Tuyen commented. ?If wishing to conclude negotiations on Vietnam?s entry into the WTO this year, Vietnam is required to basically finalise multilateral negotiations before June. Then if another session is needed, such a session would need to complete all wording and technical aspects of the agreement. In addition, Vietnam still has to close bilateral negotiations with 21 remaining countries,? Tuyen said.

?Negotiations on WTO entry are a very intense mental contest. Anyone wishing to enter the WTO has to pay a certain price because in such a mental contest, negotiators by all means must manage to obtain the interests of their nations,? said Truong. ?What is important in negotiations is what we must do and what we can negotiate. For example, such matters under the Most Favoured Nations statute (MFN) are what we must do, as for such matters which need a specific routine we must continue convincing our partners at all costs,? said Tuyen.

This can be evidenced by the bilateral negotiation with the EU ending three-months ago. At the final session that lasted from October 5 to October 9, 2004, some negotiators worked for 48 continuous hours. However, it seems that difficulties are not all attributed to Vietnamese negotiators. Pascal Lamy, head of the EU delegation commented that ?accessing the services sector was the most difficult aspect for the EU. Vietnam only agreed to allow the EU to touch upon 10 industries comprising telecommunications, transport, post, express transfer, distribution, environment, tourism, finance, construction. Nevertheless, concerning the telecoms sector?the most controversial sector debated at the negotiations?agreement was reached allowing EU firms to invest up to 30% in a Vietnamese company. This negotiation is considered more open than that of China agreed five years ago. Also, the EU was committed to an average import duty rate of 16% for industrial goods, 22% for seafood, 24% for farm produce while the average import duty rate applied by China was 10% and by Cambodia 20%.?

But some are optimistic of WTO aspirations soon. Klaus Rohland, chief representative of the World Bank in Vietnam said at a seminar reviewing investment strategy and development issues that ?there are some positive reasons to believe that Vietnam by the end of this year, or early in 2006, will officially become a full member of the WTO.?

After conclusion of Vietnam-EU negotiation session in October 2004, Lamy said that ?based on experiences of other WTO members, time to join in the WTO may be 12-18 months after concluding bilateral negotiations with big partners.?

Reportedly, during one round of talks, one negotiator frustrated with apparent stonewalling, impatiently demanded of Tuyen ?tell us the truth whether or not Vietnam is determined to join the WTO this year??

Citing perceived evidence on inequality among WTO?s members that joined the WTO before and after 1995 upon applying standards of opening up markets, Tuyen replied ?you admit inequality here, all of you must step backward and we must step forward. When the two sides meet each other, Vietnam will enter the WTO.?


Majority of Americans support Vietnam accession to WTO

18/Feb/2005 Dien Doan Doanh Nghiep

Up to two third of Americans express their big support for the trade relationship between the US and Vietnam, and also two third of Americans are in favour of Vietnam's accession to the World Trade Organisation, said Ambassador Charlene Barshefsky United States Trade Representative in Vietnam and adding that except Britain, no other country can receive the US's special favour like that.

Recently, Barshefsky, took part in the negotiation rounds of Vietnam-US Bilateral Trade Agreement in 2001, also senior international member of the Wilmer Cutler Pickering Hale and Dorr LLP Washington D.C has talked about the economic and trade relationship between the US and Vietnam, including opportunities and challenges. Excerpts:

What do you think about the trade relationship between the US and Vietnam recently?

Generally, the US-Vietnam trade relationship has been stronger over the past years, especially since the BTA came in force in 2001. Vietnam's exports to the US have grown from US$400 to US$5 billion for only four-years. At present, the US is Vietnam's biggest export market, exceeding Japan in 2002 and equal to the country's total export turnover to 25 European Union countries.

In addition, it is noteworthy that in 2004, United Airlines opened direct flights from San Francisco to Vietnam and, also Vietnam Airlines is expected to open the same air route to the US this year. The number of US visitors to Vietnam is increasing every year, from 208,000 in 1999 to nearly 300,000 visitors in 2004.

Could you tell us about the common opinion of Americans on trade and investment between Vietnam and United States as well as Vietnam's accession to WTO?

The US also has a strong export growth to Vietnam, increasing from US$330 million in 2000 to US$1.2 billion in 2004. Now Vietnam has become one of the most important markets for the US-owned aviation sector. Last year, Vietnam bought 200 U-made heavy lorries. Garment and textile manufacturers spent US$60 million importing cotton materials of the US. Vietnam's laboratories, universities and hospitals used US$30 million to buy hospital-based equipment from the America, and we also can see the improvement of technological infrastructure thanks to buying 125,000 global locating equipments.

American people continuously have positive views on the trade relationship between the two countries. A most recent survey shows that two third of Americans are content with the Vietnam-US trade growth since the BTA came in effect. The rate of Americans in favour of Vietnam entry in WTO is the same.

Which one do you think is the weak point in the economy that may cause damages to tiny Vietnam's economy when the country joins WTO?

The most important thing to Vietnam when joining the organisation is how to facilitate its industrialisation strategy. If Vietnam is striving for attracting more foreign direct investment (FDI) capital, which fields should the country introduce to them? In my view, of course state-owned enterprises play a very important role to the economy. However, if Vietnam wants to change its export structure and use skilled workforce, diversify its economy under present competitive pressures, I believe that Vietnam needs to have a very big FDI. In addition, Vietnam also should be more familiar with foreign investors, which means the country's infrastructure needs improving and upgrading, costs of houses and land, power, water, telecommunication and such like need to be reduced. At present, all costs of the above things in Vietnam are still far higher than Asean countries' and China. Reducing these costs is believed to bring great successes in attracting FDI for Vietnam.

Speeding up the equitisation of state-owned enterprises and increasing the cap on foreign investors shares in equitised SOEs should be expedited as quickly as possible.

If Vietnam succeeds in joining the WTO, how will the legal protections for the country's products be carried out?

Bilateral trade disputes over the past two-years between the two countries will be controlled and adjusted by the biggest arbitrator-WTO. Members of WTO, so far have filed up to 321 lawsuits separately, including many suits that are similar to the trade suits filed by the US against Vietnam, typically the catfish antidumping suit. WTO could completely conversely adjudicate all the requirements on pasting labels or brand names on goods regulated by the US Parliament in 2002. In this field, Vietnam can be entitled to advantages with the eligibility of a WTO member compared with countries out of the WTO system.

How about Vietnamese businesses' opportunities to export goods when the country joins the WTO?

The remaining quota policies applied to Vietnam's garment and textile is a typical example. One long-term mater can exist in the fact is that Vietnam cannot contribute to the Doha negotiation rounds, but only indirectly via Asean. This negotiation round aims at dealing with policies on accessing markets of every key trade partners of Vietnam, including the US, EU, Japan, Thailand, Malaysia, China and such like and Vietnam's potential markets, especially India. With the possibility that the Doha negotiation cannot end before 2006, Vietnam has some opportunities to impact policies of these countries to boost its accession to WTO. Therefore, if joining a WTO member is slowed after 2005, these opportunities will be missed and it is hard for Vietnam to have the same opportunities in future.


Opening services market key to economic development

18/Feb/2005 Dien Dan Doanh Nghiep page 5

One of the compulsory requirements to join the World Trade Organisation

(WTO) is that Vietnam must open wide its services market which is still severely restricted to foreign investment. Domestic businesses, usually lethargic state-owned enterprises, are the first to complain that they will not be able to compete with heavyweight international players in the future.

In the 2001-2010 economic development strategy, the government has set a target to develop the services industry with anticipated growth of 7-8% per annum, bringing the service rate to GDP to 42-43% by 2010 and attract a workforce of 26-27% in this industry.

In 2003, the country's service industry accounted for 38% of GDP, much lower than the average rate of 50% of other low-income countries and 68% of the world. The rate of foreign invested capital for the service industry is signalling a gradual decrease: 48.8% of registered FDI in the period

1988-1996 and in 1997-2000 the rate fell to 33.9%. Since 2001, although FDI in the service industry partially recovered compared with 2000, it only accounted for 20.5% of total registered FDI capital, far lower than previously.

Vietnam and European Union formally signed bilateral agreements to help accelerate Vietnam' accession to the WTO. Under the agreements, Vietnam committed to open all fields of services, including finance, telecommunications, express mail, construction, distribution, environment, specialised services, tourism and other trade services for the EU. Apart from eight fields of services that were committed in the US Bilateral Trade Agreement (BTA), Vietnam also made commitments to open three more fields of services including transport, environment and culture.

Joining the WTO will open up a big market for Vietnam's goods and services to showcase but facing up to tougher competition by its regional neighbours especially China.

Economists said that Vietnamese businesses could even lose even the local market, or have to combine with large foreign firms to survive. A series of services including market-research services, marketing services, online accounting service at present mostly are not yet carried out by domestic firms.

"Vietnam needs to seek measures to urgently develop these industries. If not, foreign companies will dominate them immediately after the services market is opened," said an economist.

The state-owned enterprise monopoly situation seriously undermines competitive capacity in the services industry, which makes the prices of nearly all services in Vietnam, including telecoms, sea freight and such like more expensive than regional neighbours. Therefore, economists say the government must open the doors of such service industries to the domestic private sector to participate in conjunction with a step-by-step opening of the services industry to foreign-invested enterprises with the aim of increasing investment, efficiency and curtailing the monopolies held by SOEs.

There is a trend worldwide of FDI capital inflows into the service industry.

Being a country reliant on FDI for development, Vietnam has many opportunities to attract FDI capital inflows in services. Widely opening the service market for foreign investors would play a significant role in diversifying and improving the quality of the generally shoddy services provided by SOEs and contribute to higher added value and competitiveness of Vietnam-made goods.


New rules to audit banks

21/Feb/2005 Phap Luat page 2

The governor of the State Bank of Vietnam (SBV) issued a new decision on independent auditing of credit institutions. Under the above decision, every auditing business organisation must meet requirements including chartered capital or equity of at least three billion dong for domestic auditing firms, a minimum chartered capital of US$300,000 for foreign auditing firms and have at least 10 qualified auditors.

At least three auditing staff must be assigned to audit a credit institution and the firm must have been operational in Vietnam for at least three-years according to the new statute.

Every credit organisation is required to make and submit annual financial reports that are independently audited, which include balance sheet, business report, expenses and income statements and support statements for financial reports.

This decision will become effective after 15 days from the first publication of the Official Gazette.

[Decision 121/2005/QD-NHNN]


Government asks for feedback on tax law

19/Feb/2005 Vietnam News page 14

The Ministry of Finance is calling for comments form the business community on the new draft of the Law on export and Import Taxes in an effort to perfect the document before submitting it to the National Assembly later this year.

The draft law, which is being revised in accordance with the government's aim to promote exports, was introduced to the public earlier this month in Hanoi.

Deputy director of the general Department of Taxation Dang Thi Binh An said the amendments are also expected to sort out any unsolved issues, and streamline customs procedures.

An said the existing law, which was issued 13 years ago, contains several outdated stipulations that need changing so as to be more compliant with international practices, especially as Vietnam is on its way to obtaining WTO membership.

The draft covers will the recently amended sub-documents of the existing law including the regulation on taxed prices of imports and the integration of tax exempted items that are currently stipulated in different laws and regulations.

It also extends the tax payment period form 15 days to 30 days t ease the capital pressure on local firms, many of whom are small and medium-sized with limited capital.


The ministry has already posted the comparisons made between the existing law and the new draft at its website: www.mof.gov.vn to help firms study and make comments for the new law.

The new law is expected to come into effect from April 1, 2006.